Summary

I recently spoke with Sue McEntee, the Chief Operating Officer of Charitable Giving Resource Center. They are a chartiable consulting firm located in Des Moines, Iowa.(in the interest of full disclosure, Randy Fox is employed by CGRC in Illinois as a Regional Representative). Sue agreed to talk to me about succession planning for charities. We often hear about succession planning for family businesses and other businesses, but this is the first time the subject has ever really been brought to my attention in the context of charities.

Randy: Can you just give me kind of a brief explanation of what you mean by succession planning for charities? Don’t they just stay going forever?

Sue: Well, we hope that the charities go on in perpetuity, but often what we’re seeing in the nonprofit industry is that the turnover rate for not only entry level fundraisers, but for the executives and board positions, has gotten to be quite high and with any turnover, whether it’s in for profit or not profit businesses, it puts a little bit of a flat line in the activity for the organization and certainly in a fundraising or nonprofit sector. The last thing we want to do is have a blip on our radar screen when it comes to dollars coming in the door. I’ve watched people come and go and until I got into the consulting role, never really saw from the outside the ramifications that either an unknown or even a planned exit of an executive can have if there isn’t a plan in place to have that position filled either in the short term or with somebody long-term. It really wreaks havoc on what that nonprofit has been doing with their donors and the messaging that’s going out.

Randy: So, can you give a couple of examples of what some of the consequences are of that interruption first? And then let’s get into the strategies of what a nonprofit can do to overcome those issues.

Sue: Some of the results of not being ready or creating a succession plan for positions within your nonprofit can be the single most important thing to their success, and that’s relationship—relationship with their donors and the people within the community. If you can put yourself in that donor’s seat and you’ve had either phone or written conversation and communication with an individual from one of your favorite nonprofits, and this is an organization you’re passionate about, and suddenly that communication stops. Nobody’s called you, nobody sent a message and then you get a phone call and it’s a different voice, and now they’re asking a question that the person who was in their position before has already asked you, “Why do you like us as an organization?” It’s kind of like going into the doctor’s office, where you walk in and the nurse says, “Can you tell me why you’re here today,” and you go through everything. Then the doctor comes in, “Can you tell me why you’re here today?” And when it comes to relationship building, I believe that we need to come up with a plan that has a continuous relationship, even if the person is going to leave or has left.

I believe we owe it to our constituents, our donors, and our community to let them know, “Hey, John Smith has left the organization. He’s gone on to new ventures, but in the meantime, this is who is going to be contacting you, or that you can contact should you need anything from our organization.” Yet, so few nonprofit organizations take that step to either allow the person who is departing to message out to their pipeline of donors the fact that they are leaving and what that next step is or what that plan is or even who they can contact should they need any assistance. That’s probably the biggest ramification of not having a succession plan in place whether it be for an executive, a board member, or even a staff member. If a donor is used to talking to a particular person and has garnered a warm and comfortable rapport with them and suddenly there’s a new face and new voice in front of them, it’s a game changer.

Randy: What would be the steps then, that an organization would go through to create an effective succession plan? Is there some organized fashion you have? Do you have an outline or a checklist?

Sue: When it comes to succession planning for nonprofits, it’s not a whole lot different than it is for for profit industries.You have to understand that by creating a succession plan, you create a sound risk management practice for your organization. You ensure the viability of that agency in the event that the key employee is now gone. It can help you sustain your services through a temporary or long-term loss of somebody who is key to your organization. From a programmatic standpoint there are a lot of what I see are kind of the soft warm fuzzy things that you need to make sure that you have in place. There are a number of ways that you can create a succession plan, and there are two groups who have done a really good job of talking about nonprofit succession planning. There’s a group called CompassPoint Nonprofit Services out in San Francisco, and then TransitionGuides in Silver Springs, Maryland. The concepts I’m going to talk about aren’t mutually exclusive. These are things that depending upon your individual organization, you and your board can determine which of these routes might be the best for you. First, there is the emergency succession plan, and that is when somebody, for whatever reason, walks into the office and says, “I’m giving you my two week’s notice.” Or somebody calls and says, “I’ve got to have surgery, and I’m going to be out for the next six to twelve weeks and it may be long-term.” What do you do to fill that person’s position? The emergency succession plan is a way to continue without disruption and unplanned temporary absence of an individual on your staff.

There’s also a departure defined succession plan. This often happens with executive director positions or the president of a foundation, or maybe a planned giving person who’s been there for a long time and they say, “You know, I want you to know that next year in October I’m planning to retire.” Or, “We’re planning to move and so I’m giving you a heads-up that I’m going to be leaving the organization.” Departure defined succession planning is always recommended when a long-term leader has announced that they’re departing. Much of what I’ve read says that if they give you a two or more year advance notice, but I’ve seldom seen that in the nonprofit industry. What I have seen is that it’s usually six months or less.

Randy: Two years sounds like a long time for someone to be thinking about leaving.

Sue: Yes, and if you think about it most people probably don’t want to say anything, because they don’t know what the plan is. They are fearful of what’s going to happen. “If I tell them I’m leaving in a year, are they going to want me to leave tomorrow?” By making a defined succession plan, it really strengthens a nonprofit organization because everybody from the receptionist to the executive director or the president knows exactly what’s going to happen if there’s a departure.They know what their role could or should be if there is a departure. It’s really good communication strategy as well.

Randy: How important is it for the not for profit to let the donor base know that someone key is leaving a year from now or six months from now? Do you think that eases the pain?

Sue: I do. There are some articles that I read that caution people from doing that. They believe that donors will look at that as, “Oh, the senior leadership is leaving. I don’t know if I want to give to that organization anymore.” I disagree with that because we build our nonprofit database and donor base on relationships, and if you’re not completely honest and clear with your constituents about what’s happening within your organization, I believe that that garners a little bit of distrust. Tell me that somebody’s leaving. Help me understand why they’re going and where they’re going. We all understand that people move on. We all understand that people retire, but let me know how that’s going to affect me, just as I talked about earlier when suddenly a new face shows up. If I am in a relationship with someone in a nonprofit and I love that nonprofit and suddenly I have somebody new showing up and nobody told me, do I feel like was I really important to them as a donor? Was this relationship really what they told me it was when they don’t even tell me that there’s going to be a change?

I do believe that in the best interest of your donors and the people that trust you the most as a nonprofit, you should have full disclosure of things that are happening if somebody at a senior level is departing, and then being able to let them know what that plan is.

Randy: Do you think this affects the larger institutions as much as it does the smaller mid-size, where there’s one key or two key people?

Sue: I think it’s more noteworthy in large organizations, predominantly because their constituent or donor database is much larger, so they touch a lot more people. But I still believe if you’re a one person shop who has a board, it’s important for you to have some kind of a succession plan in place. I see some of the smaller new nonprofit organizations come into play, and if they’re trying to build what they’re doing for their unity and their infrastructure, that often that senior person leaves, they might have a higher turnover rate early on, and if that’s going to be the case, know what that next step is. If the executive director leaves, we are only a five year organization, are we starting all over again or do we know what’s going to happen? Is that board chair stepping in and taking care of some things before we can get a new body into place? I think from a visual perspective and what we would hear in a community, we hear more about the large organizations, but I still believe that it’s equally important for the smaller organizations to understand that it is important to look ahead and determine the “what if.” What if this person leaves, what is the next plan?

Randy: And actually, from my perspective, I think from a donor viewpoint that in a smaller organization when someone critical leaves, it might be 50% of the contact they had. In a big organization, it might be somebody they never talked to, or it might not be as important, just because the organization is so big. So I would think it would even be more viable for the mid-size to the small organization.

Sue: Some people believe that it only applies to senior positions. Again, I disagree with that, because mostly it’s the frontline fundraisers who have these ongoing relationships with donors. Even if they are just what they call a fundraiser or a development person, maybe they’re an annual appeals person, they are equally important to the bottom line of that organization. And if they’re the ones who are having the majority of the conversations with donors, then it’s equally as important to communicate if there’s a change involving that individual.

Randy: Sue, what do you think are the steps an organization should take besides hiring an outside consultant or how do you get the message to the organizations that they should be doing this, since it doesn’t seem like very many of them are?

Sue: From our organization’s perspective, we have talked about this for the last three and a half years. It is starting to catch on in some of the larger nonprofit organizations. I am seeing that board members have become very astute to the fact that when they lose their chief officer at a nonprofit that suddenly things stop or there’s a real gap in the activity, and they don’t want to see that happen. There are more people asking the questions about how to change this. How do we change the fact that in the nonprofit industry we have one of the largest turnover rates if you compare that rate to the general norm in the for profit industry? How do we keep people in organizations longer? First steps would be better communication. Letting your employees who are in a nonprofit understand what the possibilities are for them. How do they advance in your organization? What are the opportunities? And if there is a position that comes open, do you have that plan that you could test it? Have you given or even parceled out some of the duties of your executive director to say that, “Randy in the event that Sue is not here, this is one thing that I want to make sure that you understand how to do so that we have a backup plan.” And all of a sudden, you’ve now given that individual something that says, “They trust me enough to educate me on how to do this particular component of our organization.” And they’ve also told me because of that it may open me up for an opportunity to promote myself within this organization. So, I think the first step is really communicating with your staff and your board the importance of a succession plan, and then it’s sitting down and creating one and testing it. Making sure that what you’ve put into place works before you actually have to put it into place. Maybe you have an executive who is taking a couple of weeks off for vacation. Institute the succession plan. See if it really works. Start parceling out some of those duties and letting people test, what did we miss in this plan? “Oh gosh, we didn’t even think about that.” So, it’s good to test it. So, steps again, communication and then testing what you’ve done once you put that plan into place.

Randy: This sounds chillingly like running a business.

Sue: Unfortunately, I think a lot of our nonprofits across the country see themselves as 501(c)(3) nonprofits, and in essence they are a business who happens to be in the business of being a nonprofit. We really do need to think like for profits in many facets of what we do, but not all of them. I think we have a luxury in the nonprofit world of doing some things differently, but when it comes down to the bottom line and the continuity of our services, it is really important that we take some of the successful things that our for profit partners have done and institute those within our nonprofits.

Randy: And certainly from an organizational and management of personnel standpoint all of those things seem necessary. What you do after that in serving your mission, the product you produce are good acts of some sort, as opposed to making widgets, but other than that you’re having an organization that’s filled with people, and those people have to be managed, and there has to be some hierarchical structure that has to be dealt with, so all of this makes good sense to me. I was unaware and now I’m uncertain as to why it isn’t in place in more organizations.

Sue: I think if we just have organizations that when you’re in the nonprofit industry you hear oftentimes, “I have to wear so many hats,” and they do, because you’re always cognizant of that bottom line in trying to be a good steward of the resources that people have given you, but I still believe you need to set aside a little bit of time to determine the “what if”. What if we have, let’s say another stock market crisis like we did. What do we do? How do we change what we do as an organization? What if our CEO or our executive director leaves? What if our key planned giving person leaves? What is the plan in the short term and long-term? When we talk about the emergency succession plan as well as the departure defined succession plan, they each have steps involved as to what you need to do.

You just need to go through those and think about those as a group. It would be a great strategic planning once a year if you pull your staff together to say, “What would happen tomorrow if I was no longer here? How would the duties of this organization continue and how would it affect our donors and the services that we provide to the individuals and the communities that we serve?” So, it’s really pushing that envelope a little bit and forcing people to think outside that box, because right now that box is full of a whole lot of stuff and to add one more hat makes them sit back and think, “Oh! I don’t know if I can do this. This is one more thing I have to think about.” In the end, this one more thing could really help to create a smooth transition from one employee to the next and not have that little blip on that fundraising radar screen where suddenly things screech to a halt and nobody knows what to do. And it can take anywhere from two to six months to fill some positions, and even longer if it’s a key senior position. And there aren’t many nonprofit organizations that I’m aware of that can afford to go that long without there being some kind of progress on the bottom line.

Randy: The thing you said that was key to me is the impact on the donor and the donor base.

Sue: Right.

Randy: You know, what happened to the person who has been our loyal supporter or the person that we were very close to having become our loyal supporter when this sudden change happens and they’re left with a new face and a new person to create a relationship with? That can have a stunning impact, I would think.

Sue: If I were to say what’s next for a nonprofit or a board as they think about a succession plan, I would really say three things:

You need to gain greater clarity on what kind of a succession method you choose, and what is your organization’s vision for the next three to five years and how would a departure affect that?

Then discuss and brainstorm where a potential successor may come from. Is it somebody internally? Have you looked to see what the skill base is of the people you have at the table now? And, what can you do to encourage a successor to rise to the top?

Are there things as far as a contingency plan? Cross-training employees, developing employees with education, and just going out and hearing what other people are doing; building written processes and understand where information is located. It comes to mind, a few years ago I was working with a nonprofit and their accountant or someone called CFO departed. All of a sudden, they were in this frenzy. “We don’t know how they closed each month. We don’t know where all of these files are or all of these links to data is. How does the data get in there?” So, some of those things if you can create the written processes and you cross-train and develop employees that you have at the table, can really help a succession plan start out on a very strong foundation.

Randy: It only makes sense. Again, many of these things that we take for granted in the for profit business world we can’t take for granted in the not for profit business world, so it’s all great information. Sue, is there anything in just wrapping up?

Sue: I guess I would encourage nonprofits not to see a succession plan as a compromise or as a way of appearing to have a lame duck. “Oh, if they’re thinking succession planning, there must be a weak link.” It’s quite the contrary. It helps to strengthen an organization and really set them on a strong foundation for the future. And if I were a board member coming into an organization and during my orientation I was told what that succession plan is, either for specific positions within the organization or on the board itself, I’d have to sit back and say, “Wow! That is really good on their part, you know very future thinking, you know very stable.” It would set them apart from other organizations, and I know that nonprofits of any size really want to put their best foot forward. And again, I believe if they can show their constituents, their board members, and their communities, that what they’re doing is so important that they’ve thought about what happens if, and that’s probably the biggest thing. What if someone leaves, what do I do? And if there’s no plan, they tend to flounder.